The Massachusetts Education Financing Authority (MEFA) is offering $304.72 million of bonds backed by private student loans.

The deal is the first from MEFA's Education Loan Revenue Issue K indenture, a master trust.

Morgan Stanly, BofA Merrill Lynch, and J.P. Morgan are the lead bookrunners for the deal.

Proceeds from the single-tranche deal will be used to refinance bonds from MEFA’s existing Issue E indenture, as well as to fund new private student loans  that will be originated by Xerox Education Services on behalf of MEFA for the academic year 2013-2014.

The bonds received a preliminary rating of ‘A’ by Fitch.

The portfolio of student loans collateralizing Issue K will consist of approximately $140 million existing variable-rate private student loans originated with proceeds from earlier bond issuances and approximately $170 million new fixed-rate private student loans to be originated from deal closing to Sept. 30, 2014, according to Fitch in a presale report.

While the deal has no subordinate tranches, credit enhancement  is provided by overcollateralization and excess spreads; the initial credit enhancement for the notes is expected to be approximately 5.66%.

Xerox, assigned a ‘BBB’ corporate rating with a stable outlook, will be servicing the bonds.

Given that the majority of the participating schools are located in Massachusetts, the issue K trust will have a high geographic concentration in the state. Fitch notes in its report, this provides added risk as pools with such geographic concentration may experience higher forbearance, delinquency and claim levels due to rolling recessions, regional economic downturns and natural disasters.

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